2015 (6) TMI 1175 - AT - Income Tax

Reopening of assessment - scope of the expression reason in the phrase reason to believe - addition on gift receipt - Held that - AO received an information from ACIT CC-V Ludhiana that assessee has received gift of 5 lakhs from Shri Jagdish Duggal 38G Sarabha Nagar Ludhiana from bank account No. 16503 of Shri Jagdish Duggal maintained with Canara Bank Bharat Nagar Chowk Ludhiana. AO has also this information that the nature of this entry was an accommodation entry. The above information / material received by the Assessing Officer was relevant and afforded a live link or nexus to the formation of the prima facie belief that income chargeable to tax had escaped assessment in the assessee s hands. Therefore there is no merit in the submissions made on behalf of the assessee that reopening of the assessment was invalid. Material before the Assessing Officer was relevant and afforded a live link or nexus to the formation of the prima facie belief that income chargeable to tax had escaped assessment in the assessee s hands. Thus reopening of the assessment was valid - Decided against assessee

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act.
2. Addition of Rs. 5 lakhs as income from undisclosed sources.
3. Admission of additional evidence by the CIT(A).

Issue-wise Detailed Analysis:

1. Validity of the reopening of assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act:

The assessee challenged the reopening of the assessment under Section 147 and the issuance of notice under Section 148, arguing that the Assessing Officer (AO) did not form an independent opinion and relied solely on the information provided by the ACIT, CC-V, Ludhiana. The CIT(A) rejected this contention, stating that the information received constituted a "reason to believe" that income chargeable to tax had escaped assessment. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in ACIT v. Rajesh Jhaveri, which clarified that at the stage of issuing notice, the AO needs only a prima facie belief based on relevant material, not conclusive proof of income escapement. The Tribunal found that the information regarding the Rs. 5 lakhs gift was sufficient for the AO to form a requisite belief, thus validating the reopening of the assessment.

2. Addition of Rs. 5 lakhs as income from undisclosed sources:

The AO added Rs. 5 lakhs to the assessee's income, treating the gift as unexplained credit under Section 68 of the Act. The assessee argued that the gift was genuine and supported by sufficient evidence. The CIT(A) upheld the AO's addition, but the Tribunal noted that the CIT(A) did not admit the additional evidence submitted by the assessee, which could prove the genuineness and creditworthiness of the donor. The Tribunal directed the CIT(A) to admit the additional evidence and reconsider the issue, ensuring a fair opportunity for the assessee to present her case.

3. Admission of additional evidence by the CIT(A):

The assessee submitted additional evidence, including an affidavit, gift deed, bank statements, and explanations of bank entries, to the CIT(A), which were not considered. The Tribunal found that the CIT(A) wrongly refused to admit the additional evidence, citing factual inaccuracies in the CIT(A)'s observations about the assessee's non-appearance before the AO. The Tribunal emphasized that the CIT(A) has the power under Section 250(4) and Rule 46A to admit additional evidence if it is crucial for deciding the appeal. The Tribunal directed the CIT(A) to admit the additional evidence and decide the matter afresh, providing a fair opportunity for both the assessee and the AO to be heard.

Conclusion:

The Tribunal upheld the validity of the reopening of the assessment but directed the CIT(A) to admit the additional evidence and reconsider the addition of Rs. 5 lakhs as income from undisclosed sources. The appeal was allowed partly for statistical purposes, ensuring a fair reassessment process.